5th Workshop on Export Credit Agencies and the Environment

3-4 April 2006, Vienna (Austria)

About the 5th Workshop

Sixty-five experts from Export Credit Agencies (ECAs), financial institutions, the private sector and NGOs met in Vienna for the Fifth Workshop on Export Credits Agencies and the Environment organised by UNEP and the Oesterreichische Kontrollbank AG (OeKB).

The agenda covered five different topics over two days; the Agreement on Special Financial Terms and Conditions for Renewable Energy and Water Projects; best practices for conducting environmental and social review of hydropower projects; approaches to reporting; disclosure policies; and treatment of so-called 'carbon credits' and associated issues of carbon finance as they relate to ECA's business operations.

Workshop Conclusion

With an intentionally mixed group of participants, presentations and discussions were diverse. The following section provides an overview of some of the main points raised in each section of the workshop, which did not attempt to reach consensus on any issue.

Session 1: The Agreement on Special Financial Terms and Conditions for Renewable Energy and Water Projects

The Special Terms are fairly well known at least among large exporters in the business

There is a need to assess whether the new terms really are making a difference and how, if possible, could be improved

There is recognition of the importance of longer terms but some flexibility in repayment profile would facilitate (similar to the flexibility under the Project Finance guidelines)

There is a need for information on the number of cases which are notified applying the new terms

The ceiling on local costs remains a barrier for renewable energy projects and is somewhat inconsistent with the way foreign content is treated by the Agreement (i.e., limits are set by ECAs and their own national authorities, not by the Agreement guidelines)

Greater support for investment in local currencies would be helpful.

Session 2: Inclusion of Hydro Power Projects in the Agreement on Special Financial Terms and Conditions for Renewable Energy and Water Projects

Hydropower projects are of great concern to the NGO community, but longer terms have no bearing on the environmental or social impact of a project; rather this is an opportunity to highlight the issues of large hydropower in general

Industry guidelines have been developed by the International Hydropower Association that take into account the recommendations of the World Commission on Dams and the desire that partnerships be built between local communities and project companies. Some speakers noted that these were an improvement on approaches being used by international financial institutions

Certifying that standards are met, monitoring and compliance are best done by a third party assessor.

Session 3-4: Sustainability Reporting / Disclosure Policies

ECAs have been preparing sustainability reports on their websites and seek feedback from stakeholders; acknowledgement that this information is used helps justify continuing with the efforts

NGOs are concerned that there is insufficient time to review and comment on documents during the ex ante reporting period. Concern also exists regarding the language of disclosure, particularly relating to the resettlement plans for large dams

Limitations are faced by ECAs offering insurance cover for exports in terms of the timing of their involvement in the project

Some clarity about the definition of what constitutes commercial confidentiality would facilitate disclosure

It would be helpful if the review of the OECD Common Approaches due in 2006 should take these issues into account.

Session 5: Carbon Credits and the Role of ECAs

Recognition that ECAs have deep experience and expertise in evaluating risk of projects in developing countries suggests that they may have a role to play in insuring CDM projects.

The Kyoto Mechanisms are not without challenges, but CDM eligible countries are in need of energy solutions and hard currency revenues. "Green energy" that can also generate carbon credits sold to countries/companies that need credits to meet their Kyoto targets, can make a positive contribution to sustainable development. Some speakers, however, stated that fundamental flaws in the market based mechanisms will ultimately undermine public support for these and that ECAs should engage with CDM and JI projects with caution if at all.

The private market is developing products to insure against carbon risks, including non-delivery of Certified Emissions Reductions (CERs) arising from CDM projects. ECAs might explore whether they could play a similar role in insuring such projects - even without there being a national export - on the basis that their national governments and companies are importing the carbon credits.

UNEP continues to see great value in bringing people and organizations holding diverse views together for a constructive dialogue and exchange of opinions and experience. UNEP thank everybody involved for their efforts in making the workshop possible, with special thanks going to OeKB for the excellent organization and hosting of the 5th Workshop on ECAs and the Environment!